Question: You have the following information for Claymore Inc.: 5%, 15%, -10%, 25%.
1. Calculate the average return and standard deviation for a population for Claymore.
2. The S&P 500 market portfolio has a standard deviation of 20%.Claymore Inc. has a beta of .57.Find the correlation between Claymore and the S&P 500.HINT: The formula for beta can help you get the correlation.
3. The S&P market portfolio has a return of 15%.Ten-year T-bonds (risk-free asset) have a return of 2.5%.Use Claymore's beta of .57 to estimate the required return for the stock.
4. If you put $120,000 into Claymore and $40,000 into the S&P 500, find the return and standard deviation of your portfolio.
5. Based on additional research, you estimate the expected return on Claymore's stock at 16%.If the market is efficient, what will happen to the price of Claymore? Explain.
6. Claymore announces a new project.The new project has a beta of 1.5 and an expected return (IRR) of 20%.Is the project a good idea? Explain.